Akorn Provides Financial Guidance for 2013

-Expects Record Revenue of $325 to $335 million-

-Reaffirms the previously issued guidance for 2012-

January 17, 2013 02:30 PM Eastern Standard Time

LAKE FOREST, Ill.--(BUSINESS WIRE)--Akorn, Inc. (NASDAQ: AKRX), a niche pharmaceutical company, today
provided full year 2013 financial guidance. The Company’s guidance
excludes the impact from any products for which the Company has not yet
received FDA approval. The Company will provide a more detailed update
during its year-end 2012 conference call.

2013 Financial Guidance

Total revenues

$325 – 335

million

Total gross margin percentage

54 – 56

%

SG&A expenses

$51 – 54

million

R&D expenses

$22 – 26

million

Intangible asset amortization expense

$7

million

Income tax rate

~ 37

%

GAAP net income

$53 – 57

million

GAAP net income per diluted share

$0.46 – 0.50

Adjusted net income 1

$65 – 69

million

Adjusted net income per diluted share 1

$0.57 – 0.61

Capital expenditures

~ $25

million

1

See Non-GAAP Financial Measures below for the reconciliation of
Adjusted net income and Adjusted net income per diluted share to
GAAP net income and GAAP net income per diluted share.

Raj Rai, chief executive officer, commented, “We had a fantastic 2012 as
a result of great execution on many fronts by the entire organization
and are reaffirming our earlier issued guidance. We are excited about
the long term growth prospects of our company given the growing product
pipeline and the incremental manufacturing capacities achieved through
our investments in our plants in the US as well the acquisition of the
manufacturing assets in India. Our focus in 2013 is on accelerating our
pipeline development through further investments in R&D and on preparing
our Indian location for US FDA approval.”

Frequently Asked Questions

Q: When will Q4 2012 results be released?

A: We are reaffirming our 2012 guidance, and will discuss the actual
results at our year-end conference call on February 26, 2013.

Q: Will Akorn be able to maintain the expected 2012 gross margins of
approximately 58% in 2013?

A: Overall gross margins for 2013 are expected to be in the range of
54-56% as a result of growth from lower margin new products that are
either partnered with shared economics, in-licensed or are contract
manufactured for Akorn.

Q: Are there any margin improvement opportunities in the future?

A: Yes. The vast majority of Akorn’s active pipeline will be
manufactured by Akorn with no partnering or shared economics and as a
result are expected to have significantly higher margins than the
products contributing to growth in 2013. Additionally, we expect
improvement in the margins on our more competitive products once we
achieve US FDA approval of our Indian manufacturing site.

Q: Why is Akorn projecting a substantial increase in R&D costs?

A: There are three primary factors contributing to the increased costs:
1) the Generic Drug User Fee Act (“GDUFA”) fees associated with the
projected 25 abbreviated new drug application (“ANDA”) filings for 2013;
2) the cost of bio-equivalence (“BE”) studies associated with high-value
products; and 3) the increased internal R&D costs due to the build out
and staffing of a new, larger R&D facility designed to accommodate our
plans to complete 35-40 ANDA filings per year and expand into the
development of specialty formulations such as carbapenems, hormones and
oncolytics.

Q: Can you provide some specific guidance on expected new product
approvals/launches?

A: The following table shows, by segment and current product status, the
number and total IMS market size of products/ANDAs expected to launch
each year.

IMS Market Size of Expected Launch Products

Expected # of Products*

(in millions)**

Current

Segment

Product Status

2013

2014

2015

2013

2014

2015

Ophthalmic

Brand

0

2

2

$0

$235

$130

Generic

3

7

1

$120

$115

$0

Injectable

Brand

1

5

5

$70

$520

$280

Generic

2

1

2

$55

$40

$15

Other

Brand

0

2

0

$0

$415

$0

Generic

1

3

2

$5

$345

$695

Total

7

20

12

$250

$1,670

$1,120

*We have generally used a standard 30 months from filing date to
determine launch timing of our pipeline products. Based on the
guidance provided by the FDA, we should not expect GDUFA fees to
yield a reduction in FDA review time until after 2015. Also note
that we have excluded from our analysis products which are not yet
filed, as well as filed products where the product patents extend
beyond this forecast horizon.

**The IMS market size is based on the trailing 12 months ended
September 30, 2012, excluding any trade and customary allowances and
discounts. The IMS market size is not a forecast of our future sales
of the applicable products.

Q: Why are capital expenditures increasing over the level projected
for 2012?

A: The expansion projects for our India facilities are expected to cost
in the range of $25-30 million over two years, of which approximately
$15 million is expected for 2013. These investments include the build
out of the oncology facility as well as expansion of the other
injectable facilities to add lyophilization capability, incremental
filling lines and automation.

Q: When will the Akorn India facilities be US FDA approved?

A: As a first step, we have implemented Akorn’s global quality policies
at the Akorn India site. We are now in the process of implementing our
plan to transfer existing or file new products to trigger US FDA
facility inspections by late 2013 or early 2014. The proposed oncology
facility and expanded injectable facility should be completed by late
2014, and we expect the US FDA to inspect these facilities by late 2015
or early 2016.

About Akorn, Inc.

Akorn, Inc. is a niche pharmaceutical company engaged in the
development, manufacture and marketing of multisource and branded
pharmaceuticals. Akorn has manufacturing facilities located in Decatur,
Illinois, Somerset, New Jersey and Paonta Sahib, India where the Company
manufactures ophthalmic and injectable pharmaceuticals. Additional
information is available on the Company’s website at www.akorn.com.

Forward Looking Statements

This press release includes statements that may constitute
"forward-looking statements", including projections of certain measures
of Akorn's results of operations, projections of sales, projections of
certain charges and expenses, projections related to the number and
potential market size of ANDAs and other statements regarding Akorn's
goals, regulatory approvals and strategy. Akorn cautions that these
forward-looking statements are subject to risks and uncertainties that
may cause actual results to differ materially from those indicated in
the forward-looking statements. These statements are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Because such statements inherently involve risks and
uncertainties, actual future results may differ materially from those
expressed or implied by such forward-looking statements. You can
identify these statements by the fact that they do not relate strictly
to historical or current facts. They use words such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe," and other
words and terms of similar meaning in connection with a discussion of
future operating or financial performance. Factors that could cause or
contribute to such differences include, but are not limited to:
statements relating to future steps we may take, prospective products,
future performance or results of current and anticipated products, sales
efforts, expenses, the outcome of contingencies such as legal
proceedings, and financial results. These cautionary statements should
be considered in connection with any subsequent written or oral
forward-looking statements that may be made by the company or by persons
acting on its behalf and in conjunction with its periodic SEC filings.
You are advised, however, to consult any further disclosures we make on
related subjects in our reports filed with the SEC. In particular, you
should read the discussion in the section entitled "Cautionary Statement
Regarding Forward-Looking Statements" in our most recent Annual Report
on Form 10-K, as it may be updated in subsequent reports filed with the
SEC. That discussion covers certain risks, uncertainties and possibly
inaccurate assumptions that could cause our actual results to differ
materially from expected and historical results. Other factors besides
those listed there could also adversely affect our results.

Non-GAAP Financial Measures

In addition to reporting all financial information required in
accordance with generally accepted accounting principles (GAAP), Akorn
is also reporting Adjusted EBITDA, Adjusted net income and Adjusted net
income per diluted share, which are non-GAAP financial measures. Since
Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted
share are not GAAP financial measures, they should not be used in
isolation or as a substitute for consolidated statements of operations
and cash flow data prepared in accordance with GAAP. In addition,
Akorn’s definitions of Adjusted EBITDA, Adjusted net income and Adjusted
net income per diluted share may not be comparable to similarly titled
non-GAAP financial measures reported by other companies. For a full
reconciliation of Adjusted EBITDA and Adjusted net income to GAAP net
income, please see the attachments to this press release.

Adjusted EBITDA, as defined by the Company, is calculated as
follows:

Net income, plus:

Interest income (expense), net

Provision for income taxes

Depreciation and amortization

Non-cash expenses, such as share-based compensation expense, changes
in the fair value of warrants, and deferred financing cost amortization

Other adjustments, which historically have included equity in earnings
of unconsolidated joint venture related to the sale of the joint
venture's assets, amortization of the fair value adjustment to
inventory acquired through business acquisitions, and Kilitch Drugs
(India) Limited acquisition-related expenses.

The Company believes that Adjusted EBITDA is a meaningful indicator, to
both Company management and investors, of the past and expected ongoing
operating performance of the Company. EBITDA is a commonly used and
widely accepted measure of financial performance. Adjusted EBITDA is
deemed by the Company to be a useful performance indicator because it
includes an add back of non-cash and non-recurring operating expenses
which have little to no bearing on cash flows and may be subject to
uncontrollable factors not reflective of the Company’s true operational
performance (i.e. fair value adjustments to the carrying value of stock
warrants liability).

Adjusted net income, as defined by the Company, is calculated as
follows:

Net income, plus:

Intangible asset amortization, net of tax

Non-cash expenses, such as non-cash interest, share-based compensation
expense, changes in the fair value of warrants, and deferred financing
cost amortization, all net of tax

Other adjustments, such as equity in earnings of unconsolidated joint
venture related to the sale of the joint venture's assets,
amortization of the fair value adjustment to inventory acquired
through business acquisitions, and Kilitch Drugs (India) Limited
acquisition related expense, all net of tax

Adjusted net income per diluted share is equal to Adjusted net
income divided by the actual or anticipated diluted share count for the
applicable period.

The Company believes that Adjusted net income and Adjusted net income
per diluted shares are meaningful financial indicators, to both Company
management and investors, in that they exclude non-cash income and
expense items that have no impact on current or future cash flows, as
well as other income and expense items that are not expected to recur
and therefore are not reflective of continuing operating performance.
Adjusted net income and Adjusted net income per diluted share provide
the Company and investors with income figures that would be expected to
be more aligned with cash flows than GAAP net income, which includes a
host of non-cash income and expense items.

While the Company uses Adjusted EBITDA, Adjusted net income and Adjusted
net income per diluted share in managing and analyzing its business and
financial condition and believes these non-GAAP financial measures to be
useful to investors in evaluating the Company’s performance, each of
these financial measures has certain shortcomings. Core business revenue
does not provide a full picture of the Company’s historical revenues.
Adjusted EBITDA does not take into account the impact of capital
expenditures on either the liquidity or the GAAP financial performance
of the Company and likewise omits share-based compensation expenses,
which may vary over time and may represent a material portion of overall
compensation expense. Adjusted net income does not take into account
non-cash expenses that reflect the amortization of past expenditures, or
include stock-based compensation, which is an important and material
element of the Company’s compensation package for its directors,
officers and other key employees. Due to the inherent limitations of
each of these non-GAAP financial measures, the Company’s management
utilizes comparable GAAP financial measures to evaluate the business in
conjunction with Adjusted EBITDA, Adjusted net income and Adjusted net
income per diluted share and encourages investors to do likewise.